Alcatel-Lucent appoints former Vodafone exec Michel Combes as CEO

Alcatel-Lucent's board has appointed Michel Combes as the company's new Chief Executive Officer, following Ben Verwaayen's recent resignation.

Combes will now have to lead an effort to decide what kind of vendor Alcatel-Lucent wants to be, according to analysts

By
Mikael Ricknäs
| 22 Feb 2013

Alcatel-Lucent's board has appointed Michel Combes as the company's new Chief Executive Officer, following Ben Verwaayen's recent resignation.

It only took the Alcatel-Lucent's board two weeks to appoint new CEO after Verwaayen's plan to step down became public earlier this month. Combes will take over on April 1, and will also join the company's Board of Directors, if shareholders approve at the company's annual general meeting on May 7.

Combes served as head of Vodafone Europe, where he was also a board member, and has worked at France Télécom.

His departure from Vodafone was announced in May last year, when it was revealed he planned to take over as CEO of French operator SFR -- but the move never materialized. SFR put out a statement in May announcing the appointment, but this was followed by a new statement a few months later confirming a different CEO following a management shake-up.

Getting a CEO that knows how operators think could be good for the struggling network equipment vendor.

"The idea of bringing on board an operator executive has some good rationale behind it," said Mark Newman, chief research officer at Informa Telecoms & Media.

The news of Verwaayen stepping down came as Alcatel-Lucent reported a fourth-quarter net loss of ¬1.37 billion (US$1.81 billion) at the end of a challenging year that saw the company swing from a profit during 2011 to a loss.

The company was taken off guard by the rapid move from CDMA to LTE in North America, a weakening GSM market in China, and the economic situation in Europe, Chief Financial Officer Paul Tufano said during the conference call presenting the results.

Combes will now have to lead an effort to decide what kind of vendor Alcatel-Lucent wants to be, and find a clearer direction for the future, according to analysts.

So far, the company hasn't gone through the same restructuring effort that competitor Nokia Siemens Networks has. It shed a number of units and laid off thousands of employees, according to Sylvain Fabre, research director at Gartner.

"The question is what the company's is strategy and how is it going to get there. Alcatel-Lucent is still at the point where it needs to formulate what the hard decisions it needs to make are, and then execute aggressively on that," Fabre said.

Newman agrees: "It is interesting to see that Nokia Siemens, even though it is still early days, seems to have had a gentle recovery by streamlining and simplifying its business," he said.

Alcatel-Lucent has said it is now planning to sell some of its units in the next 18 to 24 months. Combes' knowledge of the industry as well as his experience of business and financial transformation will be pivotal in helping the company pursue an aggressive transformation, it said in a statement.

Part of the restructuring work should also focus on making its wireless business more competitive. It remains the key challenge facing Alcatel-Lucent, and the company has made no secret of the fact that it wants to be a leader in LTE, according to Newman. The company lost market share in the radio access network sector in 2012, and remains the fourth largest vendor behind Ericsson, Huawei Technologies and Nokia Siemens, ABI Research said on Thursday.

Combes, a Frenchman, will also have to address continuing tensions between the French and American parts of the organization and help energize its employees, including those based in other parts of the world, according to Fabre. However, if Alcatel-Lucent's problems escalated to the point where the French government had to step in to avoid a fate like Nortel's, his nationality could help, Fabre said.

Recently there have been rumors about a potential deal between Nokia Siemens and Alcatel-Lucent, which would see Siemens exit its joint venture with Nokia. However, if that deal went through, the big winners would be Ericsson and Huawei, according to Newman. On paper, consolidation makes sense, but in reality it is hard to see how it could be successful, he said.

"The cultural challenge of bringing together a U.S.-French organization with a Finnish-German organization will, in my mind, be a massive headache," Newman said.